From BMX to FX: My Cycling Insights for Managing FX Risk

When I was 12 years old my parents bought me my first 10-speed road bike.  From my earliest memory, I had a BMX bike that I rode everywhere.  We were a one-car family, which my dad generally used for work. For me to get around to my friends’ places in my semi-rural Australian town, it was always on my BMX.  When I received my 10-speed road bike the limitations of my exploration expanded significantly and my introduction to what would become a career in managing FX risk.

Over the 37 years since that memorable birthday, my love of cycling has burned as bright as ever. At my current stage of life, I have the fortunate privilege of far greater horizons than my 12-year-old self.  With my wife and friends, I have ridden my bike in some of the most beautiful places on earth.

Technology has changed our way of life so much since the 1980s and bikes are no exception.  Back then, I’d get up early to go on training rides. To light up the road I had a resistance generator that sat against my tire, wired to a large and heavy headlight that barely penetrated the darkness, especially when not pedaling hard.

Nowadays when I’m doing early-morning rides I’m lit up like a Christmas tree on a rechargeable light that weighs a few grams and lasts for 6+ hours at 1000 lumens (tech-speak for really bright!).

My first bike was made of lugged steel, had a 5-speed rear cassette, 2 chainrings up front (making it 10 speeds), shifters on the down tube, and weighed about 50 lbs.  My current bike is made of carbon fiber, has 24 speeds, aerodynamic design, deep dish carbon fiber rims, electronic shifting, and weighs about 16lbs.

I’m a fairly competitive soul and have a few races that I typically compete in each year.  The highlight for me is the race at the end of the season that starts in Logan, Utah, and finishes two states away in Jackson Hole, Wyoming.  It’s a one-day, 203-mile (325 km) race with about 10,000 feet (3,200 meters) of elevation gain, among the longest amateur races in the US. This year will mark my 13th straight year at Logan to Jackson, which coincides with the time I’ve spent working with GPS Capital Markets.

I spend about 15 hours each week on my bike during the training and racing season which gives me lots of time for audiobooks, podcasts, and time alone with my thoughts.  I’m a numbers guy, so I’m always looking at my cycle computer and calculating numbers to push myself.  How fast do I need to ride if I want to hit a certain average speed?  At what mile will I hit that average? How much will that climb slow my speed? I’ve also given a lot of thought to how cycling relates to my life as an FX risk advisor and my important client relationships.

Teamwork

For instance, having the right team around you is vital!

Very few people can do it all alone and be successful.  A big part of road race strategy is what’s called drafting.  You’re going to see different statistics on this but my years of experience (I ride with a power meter that measures wattage output) tells me that I can save up to 40% of my effort by riding in the slipstream of another cyclist.  I’m a pretty big guy, especially for a cyclist, so I’m usually stronger on flat roads compared to my teammates who might be lighter and faster on the climbs.  So, by combining different skill sets, cyclists can work smart together. You can share the load by rotating turns off the front (in the wind) or put the bigger guys on the front on the flat roads and the smaller guys on the front on the hills. Working as a group allows for much better end results than working alone.

The business implication here is clear. Building a strong and talented team around you beats solo performance almost every time!  Our approach at GPS is to be an extension of your finance team, to combine our knowledge, software tools (FXpert), and experience in FX risk management with those of our clients, to accomplish much more than they could on their own.

Data

Wise use of data is as critical to business as it is to cycling. In racing, a power meter measures how much power you’re putting into the pedals. Almost all modern amateur and professional training programs these days are centered around power output. Used correctly, a cyclist will become intimately familiar with the levels of power they can maintain for a certain period without going too deep into their energy reserves.

In one of my big races a few years back, I got out front on a long climb and was feeling great both physically and mentally. The motorcycle referee was giving me time splits on how close the chasing peloton was, and as I drew further and further ahead my enthusiasm kept pushing me, even though my power meter was telling me that my power output was beyond what I could, or should, sustain for a long endurance race.  In other words, I wasn’t paying enough attention to the data. About an hour later in the race, my body caught up with what my data was telling me all along.  The early energy that I had expended was too much, and I hit the endurance wall. My legs had nothing left and I just watched dejected as my race slipped away from me.

One of the key components to GPS’ success as an FX advisor is helping companies collect and organize their data.  It can be complicated and difficult with many moving parts, so many companies struggle to fully understand specifically where their FX risk is coming from. GPS’ in-house technology such as the Balance Sheet Hedging module, together with our team of risk management experts, helps companies clear this hurdle and have total confidence in their FX exposure data.

Priorities

For me, the cycling season ends when the leaves are all off the trees in Utah and the first snow flurries hit.  Interestingly, that also coincides with eggnog season… which leads to a few extra pounds and then a few more and well, you get the picture.  There are a lot of other things that can shift our focus and if you’re a competitive cyclist who loves to eat, that can be challenging.  At the back of my mind, I always know that to be competitive next year I will have to put in even more work to get back into race shape.

If you’re a CFO, Treasurer, Director of Finance, etc., you may be well aware of your FX risks, but it’s easy to be swamped with competing priorities, or fires to put out.  If you find yourself in this position, don’t stress. GPS can help remove the eggnog from the fridge and put a protein shake in its place.

Setbacks

I’ve had my fair share of setbacks.  Almost anyone who cycles avidly or competitively will have had some kind of crash. My worst for me came at the Logan to Jackson race in 2016.  After almost 9 hours of racing, a group of about 10 racers came within a few kilometers of the finish line.  This is the point in the race where you feel totally drained and wonder how you can muster any energy for a final sprint to the line.  Amazingly, I felt pretty good and thought I could produce a strong sprint.  When we were less than 700 meters from the finish line, the group sprint started ramping up and I was in a good position, about three bikes back from the leader, ready to time that crucial moment to produce about 10 seconds of top-end effort to get past everyone for the win.

Just at that moment, a shout went up, the guys in front of me swerved, and as my attention had been on the back wheel of the guy in front of me, I missed seeing the large traffic cone in the road which, I learned, feels like a solid brick wall when you hit it at close to 40 miles per hour on a bike. Fortunately, I didn’t break any bones and came away with only road rash.  But I was bitterly disappointed because I had prepared so hard for a race that meant a lot to me.  I’d have to wait another year because of one moment when I was focused on the wrong thing.

You may find yourself in a similar position of being focused on something also very important to your business, such as implementing a new ERP system, growing sales, or finding that key international partner.  Meanwhile, risks are looming, such as a strong USD, leading to lower margins than you expected on your foreign sales. Don’t leave yourself feeling like you’ve hit a traffic cone at 40 miles per hour, with only lycra to protect you from the asphalt.

We can all draw from our life experiences when working in business. For me, cycling has taught me many of the powerful lessons that I apply at GPS, and I’m always ready to share them.